AIRLINES : NWA Mulls the Options for Northwest Air’s Future
Takeover target NWA Inc., the parent of Northwest Airlines, said Monday that its board is willing to consider a range of alternatives for the airline’s future, including possibly selling the company to Los Angeles billionaire Marvin Davis.
NWA had earlier rejected Davis’ bid of $2.62 billion as inadequate. But Monday, the firm said it would talk to Davis or any other interested bidder as part of an effort to “enhance shareholder value.”
Other alternatives include the repurchase of some of the firm’s outstanding shares, a special stock dividend, sale of the entire company and a partial or complete liquidation, NWA said.
A spokesman for Davis, who plans a proxy fight for control of the airline, had no immediate comment on NWA’s announcement.
“This announcement tells shareholders that they will get something, and it will be better than the $90 a share that Davis offered,” said Samuel Buttrick, an airline industry analyst with Morgan Keegan & Co. in Memphis, an investment firm.
Buttrick said he expects NWA to buy back a substantial amount of its shares for between $110 and $105 a share. He said NWA could finance the repurchase through a sale and lease back of its aircraft fleet and the sale of its Japanese real estate.
Airline industry analysts said Davis might try to negotiate a takeover, rather than wage a battle for control of NWA’s board. “It’s much less expensive to do a friendly deal if it can be worked out,” said Kurt Rivard, an airline industry analyst with Dain Bosworth Inc., a Minneapolis investment firm.
NWA said it would provide Davis and other possible buyers with confidential information about its business to help negotiate a price for the airline company.
However, analysts said it was possible that NWA might require Davis and other possible buyers to sign so-called “standstill agreements,” or promises not to accumulate NWA stock, to get the confidential information. Such a requirement might prevent a friendly deal, the analysts said.
NWA said it was possible that, after exploring all the options, the company might chose to do nothing. However, most analysts said it was clear that NWA planned to take some action.
NWA said it expects to start studying its options on Monday and has hired First Boston, a New York investment firm, to advise it. Analysts doubted that NWA would complete its study by May 15, the date of its annual meeting.